Financial News

HSBC Joins Bank Bonus Rush With £2.4bn Payout

HSBC will next week join the ranks of British banks awarding significant bonuses for 2013 when it unveils a discretionary pay pool of more than £2bn for its staff around the world.

Sky News has learnt that HSBC, Europe's biggest and most profitable bank, will announce the bonus pot of just under $4bn (£2.4bn) alongside full-year results that are expected to include a significant rise in pre-tax profits.

The bonuses will represent a modest increase on the $3.689bn (£2.2bn) awarded in 2012, although one source said on Friday that the rise in variable pay across the bank would be smaller than the likely increase in earnings.

The move to lower the overall group payout ratio from 17% last year to in the region of 15% this time had been led by Sir Simon Robertson, the deputy chairman of HSBC, who chairs the bank's remuneration committee.

That ratio includes fixed as well as variable pay, and comes as major banks are drawing up schemes to pay senior staff to combat the impact of new European Union remuneration rules.

Underlying pre-tax profits at HSBC are forecast by analysts at Standard Chartered to have risen from $18.8bn (£11.3bn) 2012 to $22.2bn (£13.3bn).

The decisions on bonuses are likely to be contrasted in the City with those made earlier this month by Barclays, which sparked fury among some leading shareholders by increasing bonuses despite a significant fall in profits.

Despite the fact that HSBC is predicted to have made approximately two-and-a-half times as much profit as Barclays in 2013, the two banks' bonus pools are almost identical.

HSBC, which is run by Stuart Gulliver, chief executive, also compares favourably to Barclays on rewards for shareholders, paying out a substantially higher proportion of profits to the bank's owners than its British rival.

The comparison is likely to apply further pressure to Antony Jenkins, Barclays' chief executive, during post-results meetings with his investors in the weeks ahead.

Mr Jenkins said that the higher rewards for staff were essential at a time when US rivals which are less affected by the new pay rules were able to poach his key employees.

Since taking over in 2011, Mr Gulliver has accelerated the restructuring of one of the world's biggest banks, shedding tens of thousands of jobs and selling dozens of businesses.

Like most banks, HSBC has drawn up plans to tackle the EU cap, which will limit the amount that banks can pay to a maximum of twice a worker's fixed remuneration in bonuses.

HSBC plans to make new share awards to around 1,000 of its top managers and is likely to confirm the initiative on Monday as well as seeking investors' approval at this year's annual meeting.

City insiders said that HSBC's plans had been well-received by shareholders.

Managers included in the scheme will only be able to immediately sell the component of the share awards which allow them to meet personal tax obligations.

One investor added that he was satisfied that the proposals would not lead to significant inflation in the overall sums HSBC paid to top managers.

Douglas Flint, HSBC's chairman, warned last year that the European rules would damage the bank's competitiveness in countries where non-EU rivals will not be subject to the ratio restrictions.

HSBC continues to benefit from a strong footprint in faster-growing markets in Asia and Latin America, although it faces ongoing questions from analysts and shareholders about the provenance of future growth opportunities.

The bank has encountered significant headwinds in the form of a multi-billion pound fine from US regulators over sanctions breaches, which helped to restrict bonus payments at the bank last year.

Analysts also expect it to announce a significant impairment charge on Monday relating to its Mexican business, which was the source of the US fine and accompanying deferred prosecution agreement with the Department of Justice.

HSBC, which employs more than 250,000 people, said on Friday that Kathleen Casey, a former US Securities and Exchange Commissioner, was joining its board.

The bank declined to comment on its proposed bonus payouts ahead of next week's results.